Corporate Governance: Promises Kept, Promises Broken

Even in the wake of the biggest financial crash of the postwar era, the United States continues to rely on Securities and Exchange Commission oversight and the Sarbanes-Oxley Act, which set tougher rules for boards, management, and public accounting firms to protect the interests of shareholders. Such reliance is badly misplaced. In "Corporate Governance", Jonathan Macey argues that less government regulation - not more - is what's needed to ensure that managers of public companies keep their promises to investors. Macey tells how heightened government oversight has put a stranglehold on what is the best protection against malfeasance by self-serving management: the market itself. Corporate governance, he shows, is about keeping promises to shareholders; failure to do so results in diminished investor confidence, which leads to capital flight and other dire economic consequences.Macey explains the relationship between corporate governance and the various market and nonmarket institutions and mechanisms used to control public corporations; he discusses how nonmarket corporate governance devices such as boards and whistle-blowers are highly susceptible to being co-opted by management and are generally guided more by self-interest and personal greed than by investor interests. In contrast, market-driven mechanisms such as trading and takeovers represent more reliable solutions to the problem of corporate governance. Inefficient regulations are increasingly hampering these important and truly effective corporate controls. Macey examines a variety of possible means of corporate governance, including shareholder voting, hedge funds, and private equity funds. "Corporate Governance" reveals why the market is the best guardian of shareholder interests.

Table of Contents:
Preface vii INTRODUCTION: Corporate Governance as Promise 1 CHAPTER 1: The Goals of Corporate Governance: The Dominant Role of Equity 18 CHAPTER 2: Corporate Law and Corporate Governance 28 CHAPTER 3: Institutions and Mechanisms of Corporate Governance: A Taxonomy 46 CHAPTER 4: Boards of Directors 51 CHAPTER 5: Case Studies on Boards of Directors in Corporate Governance 69 CHAPTER 6: Dissident Directors 90 CHAPTER 7: Formal External Institutions of Corporate Governance: The Role of the Securities and Exchange Commission, the Stock Exchanges, and the Credit-Rating Agencies 105 CHAPTER 8: The Market for Corporate Control 118 CHAPTER 9: Initial Public Offerings and Private Placements 127 CHAPTER 10: Governance by Litigation: Derivative Lawsuits 130 CHAPTER 11: Accounting, Accounting Rules, and the Accounting Industry 155 CHAPTER 12: Quirky Governance: Insider Trading, Short Selling, and Whistle-blowing 165 CHAPTER 13: Shareholder Voting 199 CHAPTER 14: The Role of Banks and Other Lenders in Corporate Governance 223 CHAPTER 15: Hedge Funds and Private Equity 241 CONCLUSION 274 Notes 279 Index 325

About the Author :
Jonathan R. Macey is the Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale Law School. He is the author of a number of books, including "Macey on Corporation Laws".

Review :
"Macey is a scholar who has mastered the latest and best scholarship in law, economics, finance, sociology, public choice theory, management and organization science, accounting and history. He prescribes a rational policy toward large corporations in a very readable and insightful work."--Henry G. Manne, Forbes.com "Against a backdrop of the most pervasive corporate failures since the Great Depression, Macey's book is must-reading for those who want to understand how we got into this mess... It should be hoped that his well-documented criticisms of those corporate governance mechanisms that investors most heavily rely upon will be heeded."--C. Evan Stewart, New York Law Journal "A must read for governance scholars and policy makers."--S. Grove, Choice "Macey's discussion of a wide range of interrelated issues is marvelously clear and provocative."--Christopher C. Faille, Federal Lawyer "Given the governance failures in our post-Enron environment, now is a particularly good time to read this book... I wish I'd written this book, although I could never have done it with the same flair and wisdom that Macey has done."--Nancy B. Rapoport, Business Law Today "Corporate Governance is a strong step forward."--Gabriel D. Rosenberg, Yale Law and Policy Review "Macey makes a strong case for his judgment about most of these institutions and practices, and events since his book was completed reinforce his judgments."--William A. Niskanen, Regulation "Corporate Governance: Promises Kept, Promises Broken provides a cogent analysis of the various institutions and systems that are supposed to promote effective corporate governance. Meanwhile, Macey's provocative theories and opinions present interesting fodder for all students of corporate organization. The book would be a valuable addition to any academic law library. Indeed, though the work is academic in tone, law firms or public law libraries with strong corporate collections may also be interested in this text."--Sara R. Paul, Law Library Journal "Overall, the book is detailed, thorough, and easy to read and follow... Macey's thoughts are obviously well-considered and thoroughly researched, and this book should be considered a must-read for anyone interested in the governance of U.S. companies. The book, or excerpts from it, would make a great companion to a corporations course because of its disagreements with the status quo."--Michael Sirkin, Concurring Opinions